ExEcutivE REPORt
Autumn Budget 21: No rabbits here
It’s not often that anyone in government makes a public apology, but this is exactly what Chancellor Rishi Sunak did with his third budget recently. Adam Bernstein reports…
I
n detail, the Chancellor is to spend £150bn to keep the wheels of the economy moving;
he can do this because the post-pandemic economy has bounced back faster than many anticipated, which should lead to higher tax receipts (buoyed partly by rising taxes).
The Office for Budget Responsibility reckons that instead of growth of 4%, the UK is likely have grown 7% this year. As a result, Sunak has an estimated £20-30bn leeway.
However, we are all going to have to cope with rising inflation that might peak at between 4.4 and 5.4% in 2022. This will probably lead to rising interest rates, and therefore higher borrowing costs, to control spending.
While business rates reform has been dodged again, Sunak announced several changes that should please, albeit temporarily. The announcements include the freezing of the multiplier until 31 March 2023, a 100% relief for 12 months against any higher bills that follow from eligible green improvements made to premises, more frequent revaluations and the extension of transitional relief for SMEs. And for eligible retail, hospitality and leisure businesses, there is to be a 50% relief on business rates – but only to a cap of £110,000 per business, and only for one year after which SMEs will find themselves in the same boat as larger concerns.
These announcements don’t really address the real issue – that many think business rates are not fit for purpose especially in light of the growth of online. Indeed, many physical retailers were hoping for, but disappointed that they didn’t get, a specific tax levied on online traders.
However, businesses should be glad that the Annual Investment Allowance (AIA) of £1m,
that was due to drop to £200,000 on 1 January, has been extended to 31 March 2023.
On investment, Sunak announced the allocation of £1.7bn in infrastructure spend covering more than 100 areas around the country as part of the ‘levelling up’ the government has talked about.
Businesses struggling with energy prices now at stratospheric levels won’t be overly thrilled with a 6.6% rise in the National Living Wage from 1 April 2022 for those over 23 years of age to £9.50 an hour. Other age bands covered by the National Minimum Wage will rise similarly.
But will employers be happy with a £3bn increase in the government’s skills programmes including investment in T-levels, the apprenticeship levy and traineeships? Maybe not, as some commentators have said that many firms don’t understand or know how to take advantage of them. Even if they did, the schemes don’t really deal with the current labour shortage – especially where HGV drivers are involved.
The £20 a week uplift in Universal Credit was not reinstated. However, those on the benefit, and who are working, will keep more of it as a result of a reduction of the clawback from 63p to 55p per pound earned over a worker’s allowance. However, they will still be struggling with a huge rise in the cost of living.
HMRC is still planning to change the way that the self-employed and partnerships assess their tax liability. Known as ‘Basis
Period Reform’, it’ll establish tax liability not on the business year but instead on the tax year. This will mean higher tax receipts to the tune of £2bn from those that don’t realign their business year to the tax year. The budget, despite hopes, did not derail the plan although implementation has been pushed back a year to 6 April 2024.
Similarly, Making Tax Digital for Self- Assessment is to be brought into effect from 6 April 2024. This means that those caught by this change will need to submit their tax return data electronically and without manual intervention.
Previously announced changes to Corporation Tax from April 2023 – a rise to 25% on profits over £250,000 and a taper between on profits between £50,000 and £250,000, and the new Health and Social Care Levy of 1.25% (and similar levy of 1.25% on dividends) are still in place.
And lastly, firms may be relieved, considering the marked rise in the cost of fuel to an all-time high, that Vehicle Fuel Duty is to be frozen for 2022-23. Allied to this, Sunak has also frozen HGV Vehicle Excise Duty over the same period. But for cars, official documentation notes that it’ll rise by RPI, presently 4.9%. n
18 Executive Hire News - Nov/Dec 2021
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